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US law makers against Huawei and ZTE - Update

The Intelligence Committee of the US House of Representatives says that American companies should avoid doing business with two of China's leading technology firms, ZTE and Huawei. In a draft report, the committee not only says that the companies pose a national security threat to the US, but goes further, suggesting that the US regulators should block mergers and acquisitions by the two companies in the US.

The Republican-controlled committee's report says that China "has the means, opportunity and motive to use telecommunications companies for malicious purposes" and that both companies have "failed to assuage the committee's significant security concerns presented by their continued expansion in the US". The report refers to "obstructionist behaviour" from the companies. This contrasts with, for example, Huawei's relationship with the government in the UK: Huawei supplies infrastructure to BT and to Everything Everywhere's new 4G network and is investing $2 billion in the UK. The company also provides access to its source code to the UK intelligence agencies at GCHQ.

Huawei and ZTE have rejected the allegations, according to a report in the Guardian. William Plummer, Huawei's US VP for external affairs, called them "baseless suggestions" that "recklessly threaten American jobs and innovation and do nothing to protect national security," going on to call for the report to "be exposed as dangerous political distractions" from addressing cyber-security issues. In an open letter, ZTE said it should "not be a focus of this investigation to the exclusion of much larger western vendors."

The investigation into Huawei and ZTE began in late 2011 and culminated in a hearing a few weeks ago at which executives from both companies appeared before the committee where they refuted allegations that the companies engaged in espionage. The report is likely to provoke an increase in tensions between the US and China, particularly with the Committee Chairman Mike Rogers directly calling for people not to buy from Huawei.